Company hopes Verizon deal will be first of many
Corning’s two biggest businesses are moving in opposite directions. The company’s fiber optics business reported a strong second quarter, surpassing the company’s display business in revenue for the second time this year. Corning said display sales were down year-on-year and the company expects glass demand growth be in the mid-single digits in the months ahead. Display technologies, led by Corning’s flagship Gorilla Glass, remain the biggest contributor to the company’s bottom line and this business seemed to get the most attention from investors in the wake of Corning’s earnings report. The stock price tumbled, giving up a small portion of the gains it has made over the last year. Before this correction, Corning shares were up about 50% since the end of Q2 2016.
Going forward, Corning expects continued strength in its fiber optics business, which it calls optical communications. The company credits the telecom and wireless industries with much of its growth. “The major telecom players are driving a hunk of our growth at this point in time,” CEO Wendell Weeks said during the company’s earnings call. “That being said, we are seeing the same type of momentum being built in our dialogues really across the spectrum of our communications business.”
Weeks said Corning’s $1 billion fiber deal with Verizon could be the first of several such agreements.
“The Verizon agreement is not unique among the deep conversations we are having around the globe with telecom players,” Weeks said. “Whether or not we will announce those or not deals more with our customers’ preference.”
5G is expected to drive investment in fiber, but where, when and how much will depend on how the 5G standard develops and which use cases are prioritized. Weeks said the potential could be huge, but it’s too soon to know for sure.
“If truly 5G as it is defined by the industry becomes the standard way to do wireless connectivity, then we are looking at a very significant secular driver for our product, perhaps one of the more significant that we have seen in our long and storied history in this business,” Weeks said. “It is still too early to make a call on what exact architectures will be used to deploy this tech. If Verizon’s view, with the right technology to deploy, the right architecture to deploy, is correct, this is a huge opportunity.”
For now, fiber-to-the-home is a major driver of sales, reported Corning CFO Tony Tripeny. Tripeny also cast Corning’s recent SpiderCloud Wireless acquisition as a way to help companies deploy indoor cellular systems that will be fed by fiber.
“We are excited about last week’s announcements that we acquired SpiderCloud which will help us accelerate the deployment of fiber inside buildings,” Tripeny said. SpiderCloud’s small cell solution can be deployed without fiber, using standard Ethernet cable, but when the small cells are used as signal sources for distributed antenna systems, fiber is often used to connect the cells to the antenna units.
